C&W hammered as UK revenues fall

In a right old spin

Shares in Cable & Wireless (C&W) took a hammering in early trading this morning after the UK telco warned sales had slipped in the first half.

Total revenue in the UK dropped 6 per cent from £810m in the first half of last year to £765m in H1 2005 following a 13 per cent slump in revenues from its retail business, the company said in a trading update today.

It reported that market conditions in the UK "remained challenging" compounded by the shift towards toward IP-based services and the knock-on that has on lower spending on traditional telco services.

What's more, C&W admitted that its planned acquisition of alternative telco Energis has been a distraction and that "since the announcement of the Energis transaction there has also been some loss of momentum in sales planning".

Indeed, the £600m take-over of Energis announced this summer appears to be giving C&W more than a few headaches. The telco now expects the deal to take longer than expected in order to address issues raised by the Office of Fair Trading (OFT).

And the telco is also having second thoughts about taking a knife to the business should it get the go-ahead to merge with Energis.

"Pending (OFT) approval of the Energis transaction, a number of cost reduction initiatives in the UK business have been suspended in advance of a clearer understanding of the requirements of the combined business," said C&W.

The telco had previously announced that 700 jobs would be axed following the merger of the two businesses.

C&W even had a special mention for its broadband ISP Bulldog, which is currently the subject of an investigation by regulator Ofcom following hundreds of complaints from customers.

Once again, C&W blames BT for its troubles but insists that things are improving.

Or as C&W put it: "Bulldog revenue figure for 2005/6 first half is £13 million reflecting the shortcomings of the BT automated process and consequent slower customer provisioning in the first quarter, together with a temporary deferral of sales and marketing efforts while the Ofcom investigation concludes.

"Management focus has been on customer care and we have been encouraged by the improvement in customer care metrics in the period."

By coffee break this morning shares in C&W tumbled 21.75p (15 per cent) to 120p. ®